The Reformed Broker: The day I realized ‘the end was near’

The following is an excerpt from Backstage Wall Street: An Insider’s Guide to Knowing Who to Trust, Who to Run From, and How to Maximize Your Investments, written by Josh Brown, vice president and financial adviser at Fushion Analytcis Investment Partners.

It’s 4:30 in the afternoon on a sunny day in 1998. I’m at Gold’s Gym in Garden City, New York, with the two senior brokers I am interning with for that summer, Steve and Greg. We work at a regional firm on Long Island, and every broker there leaves for the gym the minute the closing bell of trading rings. And they look it. I am a college kid surrounded by absolute Vikings who work hard and play harder. They are nonchalantly bench-pressing 315 pounds apiece while debating who has more gross commissions in for the day.
Greg looks up and stops talking mid-sentence and then whispers, “Stevie, you know who that is over there?”
“Shut up,” says Steve, “it can’t be! Is it?”
“Don’t look at him, stop. He’s coming over…”
Striding across the gym with one of those yellow Sony Walkman cassette players and a pair of weightlifting gloves is a guy who looks like he’s famous even though I’d never seen him before. He’s not tall, but not short either. His most notable feature is how perfectly coiffed his hair is, in the middle of a workout no less.
“What’s up, fellas? You guys stockbrokers?” He can tell; it’s something in the eyes or maybe the body language.
Greg speaks for us, “Yeah, we work over on Old Country Road. It’s an honor to meet you. You need a spotter or whatever?”
The man my bosses are freaking out over is Al Palagonia. History knows him as the “Bucket Shop King,” but in truth, he is one of the most talented retail stockbrokers who has ever wielded a telephone handset.
In the early 1990s he worked at DH Blair, a now-infamous boiler room that specialized in pushing speculative IPOs like the world was coming to an end. Legend has it he took home a million dollars his first year in the business, and eventually he was making a million a month. Some say he had a shower and a bed installed in his office, so that when he was putting away shares of a hot deal, he’d never have to leave the phone.
In a business characterized by aggression and avarice, he alternately scared the hell out of and inspired the other brokers to the point of oath-swearing. He worked so hard and made so much money for those around him that his guys would have lain in traffic on his say-so. When DH Blair was finally shut down by the regulators in 1997, Palagonia had his license stripped away and was barred from the securities industry.
It is about a year later, and Al is a legend in the eyes of all who know his story. Among retail brokers he is a god. We listen as he regales us with some of the most amazing stories we’ve ever heard. The sheer amount of stock he’s put away and commissions he’s booked is staggering. His friendship with Spike Lee is forged when Palagonia hooks the director up with his first courtside seats for the Knicks at Madison Square Garden. He will parlay that friendship into relationships with Michael Jordan and Shaquille O’Neal and speaking roles in a slew of Spike Lee films. If you’ve ever seen He Got Game (1998) with Denzel Washington and Ray Allen, the stockbroker-turned-actor played the sports agent with the driveway full of exotic cars.
As I head off to grab towels for the guys, I remember thinking, “Oh my god, this guy makes me want to break my neck to be successful!”
I am as mesmerized by his story as I am by the way he tells it. And then I hear Al’s parting advice to my star-struck senior brokers: “You guys want my honest advice about the brokerage business?” They are hanging on every syllable.
“Get the hell out.” No one blinks, but Steve’s jaw can be heard hitting the floor.
“Look, you seem like good guys. Believe me when I tell you, it’s all over. There are much better ways to become millionaires in this world—so many opportunities to win, so many great businesses. No one’s going to win the brokerage game, it’s coming to an end. Find something else to do and just outwork everyone else, you’ll thank me—I promise.”
Al grabs his stuff and heads to the door, leaving the three of us trembling and confused. Greg and Steve don’t mention the encounter to the other brokers back at the firm. I don’t know where they are these days, but I know that Al Palagonia eventually got into the private plane business. He is now one of the leading jet brokers in the world, catering to athletes and celebrities and having the time of his life doing it.
He was right about the brokerage game; the end was near.
We should’ve listened to him.

Backstage Wall Street is published by McGraw Hill and was released March 6, 2012. All content in the book and above excerpt was created by third-party author who is solely responsible for the content contained therein. Content from the book does not necessarily reflect the opinion or approval of InvestmentNews.